Lavaron Sangsnit, a senior expert on tax-system development for the Finance Ministry's Fiscal Policy Office, said a draft of the new tax had already been submitted to Finance Minister Korn Chatikavanij, who might forward it to the Cabinet for approval next month.
It is proposed that the property tax should replace two existing tax measures: the land and building tax and the land-development tax. By some estimates, the new tax would raise as much as Bt90 billion annually for local governments nationwide, against only Bt18 billion collected by them now.
Lavaron said even though the draft bill could be passed into law by Parliament next year, its implementation might be delayed for many years, because the Treasury Department had not obtained the funds to proceed with land appraisal, plot by plot, of the 30.6 million land plots around the Kingdom.
"If we cannot put into place land appraisal for the whole country, we should not take the risk of implementing the new tax," he said. "We should state in the draft that a preparation period for tax implementation [after it becomes law] would be at least two years, because we may have to wait for many years for a completed land appraisal."
Previously, the Finance Ministry said implementation of the property tax could be within two years of Parliament passing the bill.
However, some issues have not yet been settled, such as tax exemption for low-income groups. Those who own land or houses worth less than Bt650,000 may be exempted from the tax, he said. Additionally, those who own property in big cities may be treated differently from those in rural areas, because of the wide gap in land values.
Lavaron said many controversial issues had been resolved and written into the draft law recently. For example, whether land foreclosed by banks should be subject to the tax.
He said banks would be given a two-year grace period, after which they would have to pay a tax rate similar to the rate imposed on undeveloped land, with a rate up to 0.5 per cent, doubling every three years. However, the total tax amount would not exceed 2 per cent of land value.
Landlords would be expected to pay tax rates in accordance with the purpose for which the land is used by their tenants. If tenants used it for agricultural activities, the rate would be 0.05 per cent of value annually.
Land and buildings used for many activities would be taxed accordingly. If part of a property was used for commercial purposes, it would be subject to the commercial rate of up to 0.5 per cent, while other parts used for, say, residential purposes would be subject to the residential rate with a ceiling rate of 0.1 per cent.
Common property used privately by people in the same housing project or condominium would also be taxed, with the rate reflecting the use made of the property.
The ministry also plans to identify land use by following the use to which a large proportion of a particular property is put. For example, if 75 per cent of a plot was used for agriculture, then it would be accepted as agricultural land and subject to the lowest tax rate. However, if 75 per cent of land and buildings were used for a fitness centre in a housing project, the property would be subject to the commercial rate.
The effective rates of property tax will be imposed later and may be lower than the ceiling rates mentioned above.
Many politicians have objected to the new tax, because they will be among those most adversely affected. They own large tracts of land, while an average farmer owns less than 10 rai.